United States District Court, E.D. North Carolina, Eastern Division
EARL BRITT SENIOR U.S. DISTRICT JUDGE
matter is before the court on three cross-motions for summary
judgment: plaintiff Westfield Insurance Company
(“Westfield”) and defendant Zurich American
Insurance Company's (“Zurich”) motion (DE #
67); defendant Selective Insurance Company of America's
(“Selective”) motion (DE # 72); and defendant
Weaver Cooke Construction, LLC's (“Weaver
Cooke”) motion (DE # 74). The parties have filed
responses in opposition and replies. (DE ## 84, 86, 88, 90,
91, 94, 97-100.) The matter is now ripe for adjudication.
In 2006, New Bern Riverfront Development, LLC (“New
Bern”), as the developer, and Weaver Cooke, as the
general contractor, entered into a contract for construction
of a condominium complex in New Bern, North Carolina. Weaver
Cooke, in turn, entered into subcontracts with others for
performance of work required to construct the project. In
2009, New Bern filed suit against Weaver Cooke and others
based on allegedly defective construction of the project. New
Bern declared bankruptcy, and the case--the Underlying
Action--eventually ended up in the bankruptcy court for this
district, where it remains pending.
With the exception of Weaver Cooke, the parties involved in
the instant action are insurers of parties involved in the
Underlying Action. Specifically, Westfield and Zurich issued
to Weaver Cooke, as a named insured, commercial general
liability policies. Selective issued to William H. Dale d/b/a
DD Plumbing Company (“DD Plumbing”), a
subcontractor of Weaver Cooke, as a named insured, commercial
general liability policies. [Defendant Penn National
Insurance Company (“Penn National”)] issued to
East Carolina Masonry, Inc., [(“ECM”)], a
subcontractor of Weaver Cooke, as a named insured, commercial
general liability policies. Westfield and Zurich have been
contributing to the costs of Weaver Cooke's defense of
the Underlying Action pursuant to a reservation of rights.
(3/1/17 Order, DE # 55, at 1-2.)
Cooke entered into a subcontract with DD Plumbing on 4
October 2006, (see DD Plumbing Subcontract (DE #
71-22) Ex. 19 at 2), and a subcontract with ECM on 25
September 2006, (see ECM Subcontract (DE # 71-21)
Ex. 18 at 2) [hereinafter “Subcontracts”]. Both
Subcontracts require that the
Contractor [Weaver Cooke], its members, managers, officers,
directors, agents and employees  be named as additional
insureds on all insurance policies required by this
Subcontract with regard to claims and liabilities for. . .
property damage arising out of or resulting from (i)
Subcontractor's activities under this Subcontract and for
which Subcontractor may be legally liable. . . (ii) products
and completed operations under this Subcontract. . . .
(Id. at 13; DD Plumbing Subcontract (DE # 71-22) Ex.
18 at 12.) Both Subcontracts required additional insured
coverage “on a primary and non-contributing
basis.” (DD Plumbing Subcontract (DE # 71-22) Ex. 19 at
3; ECM Subcontract (DE # 71-21) Ex. 18 at 3.)
the filing of the Underlying Action by New Bern, on 14 March
2012 Weaver Cooke sent two letters, identical in substance,
to DD Plumbing and ECM (the “First Tender
Letter”) tendering its defense of the Underlying Action
and requesting that the letter be forwarded to the
recipient's agent and/or insurance carrier. (Weaver Cooke
Tender Letters (DE # 71-31) Ex. 28 at 2, 5.) On 12 September
2013, Westfield sent two subsequent identical letters to
Selective and Penn National (the “Second Tender
Letter”) tendering the defense in the Underlying
Action. (Selective App'x (DE # 80-4) at 1; Penn National
Req. for Admis. and Am. Answers (DE # 71-23) Ex. 20 at 85.)
Pursuant to the commercial liability policies, Selective and
Penn National have defended DD Plumbing and ECM,
respectively, in the Underlying Action under a reservation of
rights. (Selective App'x (DE # 78-2) Ex. 1.1 at 15; Penn
National Resp. Opp'n (DE # 84) at 2.) To date, neither
Selective nor Penn National has defended Weaver Cooke as an
In this action, Westfield, as the plaintiff, seeks a judgment
declaring that its subject policy affords Weaver Cooke no
coverage for the claims asserted in the Underlying Action; it
has no further duty to defend Weaver Cooke against the claims
asserted in the Underlying Action; and, Selective and/or Penn
National have the duty to defend Weaver Cooke in the
Underlying Action as an additional insured under their
policies on a primary and non-contributory basis or,
alternatively, on a contributory basis in equal shares with
other insurers. It also asserts a claim for equitable
subrogation/contribution against Selective and Penn National
for defense costs and expenses it has incurred in the
Underlying Action or, alternatively, for those costs and
expenses it has incurred in the Underlying Action beyond its
pro- rata share. Zurich has filed cross-claims against Weaver
Cooke and the other insurer-defendants alleging declaratory
judgment and equitable subrogation/contribution claims
similar to those Westfield alleges.
Weaver Cooke asserts a counterclaim and cross-claims against
Westfield and Zurich, respectively, for a declaration that
each owes Weaver Cooke a defense and indemnity to the claims
in the Underlying Action. It also asserts cross-claims
against Selective and Penn National. It alleges that it is an
insured or additional insured under their respective policies
and that those insurers engaged in prohibited claim
settlement practices. Weaver Cooke seeks declaratory and
(3/1/17 Order, DE # 55, at 2-3.)
March 2017, the court stayed this action on “[t]he
issue of the insurers' duty to indemnify[, ]” while
“the issues of the insurer's duty to defend Weaver
Cooke (including coverage as an additional insured) and
Selective's and Penn National's handling of Weaver
Cooke's claim” were allowed to proceed.
(Id. at 6.) Following discovery on these issues, the
parties filed the instant motions for summary judgment.
STANDARD OF REVIEW
judgment is appropriate when the record as a whole reveals no
genuine issue of material fact and the moving party is
entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a);
Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
247-48 (1986). The party seeking summary judgment initially
must demonstrate the absence of a genuine issue of material
fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). Once the moving party has met its burden, the
nonmoving party may not rest on the allegations or denials in
its pleading, Anderson, 477 U.S. at 248-49, but
“must come forward with specific facts showing that
there is a genuine issue for trial, ” Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587 (1986) (emphasis and quotation omitted). A trial court
reviewing a motion for summary judgment should determine
whether a genuine issue of material fact exists.
Anderson, 477 U.S. at 249. In making this
determination, the court must view the evidence and the
inferences drawn therefrom in the light most favorable to the
nonmoving party. Scott v. Harris, 550 U.S. 372, 378
(2007). “When faced with cross-motions for summary
judgment, the court must review each motion separately on its
own merits to determine whether either of the parties
deserves judgment as a matter of law.” Rossignol v.
Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (internal
quotation marks and citation omitted).
parties' primary dispute is whether Selective and Penn
National owe a duty to defend to Weaver Cooke in the
Underlying Action as an additional insured provision under
the policies issued to DD Plumbing and ECM. The parties also
dispute whether Selective and Penn National violated the
North Carolina Insurance Unfair Trade Practices Act
(“IUTPA”), N.C. Gen. Stat. § 58-63-15, and
the North Carolina Unfair and Deceptive Trade Practices Act
(“UDTPA”), N.C. Gen. Stat. § 75-1 et.
response to Westfield and Zurich's motion for summary
judgment, Selective contends that Westfield and Zurich
“lack standing to assert additional insured rights
under its insured's subcontract” because they are
not third-party beneficiaries of either the construction
contract or the DD Plumbing subcontract. (Selective Resp.
Opp'n (DE # 91) at 9-10.)
In order to maintain an action in federal court, a plaintiff
must show that they have standing under federal law.
Miller v. Augusta Mut. Ins. Co., 157 [F. App'x]
632, 636 (4th Cir. 2005) (citing Phillips Petrol. Co. v.
Shutts, 472 U.S. 797, 804 (1985)). Under 28 [U.S.C.]
§ 2201, “[i]n a case of actual controversy within
its jurisdiction. . . any court of the United States. . . may
declare the rights and other legal relations of any
interested party seeking such declaration.” In order to
determine if an actual controversy exists between interested
parties, courts should consider “whether the facts
alleged, under all the circumstances, show that there is a
substantial controversy, between parties having adverse legal
interests, of sufficient immediacy and reality to warrant the
issuance of a declaratory judgment.” Md. Cas. Co.
v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941).
If a plaintiff's complaint fails to allege facts
sufficient to establish standing, the suit must be dismissed.
See, e.g., Walker v. S.W.I.F.T. SCRL, 517
F.Supp.2d 801, 808-09 (E.D. Va. 2007).
Steadfast Ins. Co. v. Berkley Nat'l Ins. Co.,
217 F.Supp.3d 904, 910-11 (S.D. W.Va. 2016).
and Zurich claim that-as a direct result of Selective's
and Penn National's decision not to defend Weaver Cooke
in the Underlying Action-Westfield and Zurich have incurred
substantial “fees, cost and expenses” in their
defense of Weaver Cooke. (Westfield Compl. (DE # 1) at 8-9;
Zurich Ans. (DE # 34) at 3.) Westfield and Zurich move for
reimbursement of these costs as of the date Penn
National's and Selective's duty to defend Weaver
Cooke as an additional insured was triggered, thereby giving
Penn National and Selective the “primary responsibility
of defending Weaver Cooke for the remainder of the Underlying
Action[.]” (Westfield & Zurich Mem. Supp. Summ. J.
(DE # 71) at 2.) As such, Westfield and Zurich have
sufficiently alleged facts in their pleadings sufficient to
confer standing upon each of them. See Steadfast Ins.
Co., 217 F.Supp.3d at 911 (finding standing for an
insurance company who, although not a party to the underlying
contract, was “intimately intertwined with the priority
of all parties' coverage obligations”).
Duty to Defend
North Carolina law, interpretation of an insurance policy,
including the extent of the insurer's duty to defend, is
a question of law. See Waste Mgmt. of Carolinas, Inc. v.
Peerless Ins. Co., 340 S.E.2d 374, 377 ( N.C. 1986)
(“[The duty to defend] is an appropriate subject for
summary judgment.”). Broader than the duty to insure,
“[t]he duty to defend is generally determined by
analyzing the pleadings in the underlying lawsuit.”
Westfield Ins. Co. v. Nautilus Ins. Co., 154
F.Supp.3d 259, 264 (M.D. N.C. 2016) (citing Waste Mgmt.
of Carolinas, Inc., 315 S.E.2d at 377). As such, the
courts employ the comparison test, where “the pleadings
are read side-by-side with the policy to determine whether
the events as alleged are covered or excluded.”
Waste Mgmt. of Carolinas, Inc., 315 S.E.2d at 378.
“Allegations of facts that describe a hybrid of covered
and excluded events or pleadings that disclose a mere
possibility that the insured is liable . . . suffice to
impose a duty to defend. Thus, an insurer must defend its
insured against a lawsuit unless no allegation is “even
arguably covered by the policy.” Cont'l Cas.
Co. v. Amerisure Ins. Co., 886 F.3d 366, 371 (4th Cir.
2018) (internal quotation marks and citations omitted).
Additionally, “facts learned from the insured and facts
discoverable by reasonable investigation may also be
considered.” Waste Mgmt. of Carolinas, Inc.,
315 S.E.2d at 378 (citation and quotation marked omitted)
(finding plaintiff's affidavits relevant to determining
the defendant's duty to defend). “[A]ny doubt as to
coverage must be resolved in favor of the insured.”
Duke Univ. v. St. Paul Fire & Marine Ins. Co.,
386 S.E.2d 762, 763-64 ( N.C. 1990) (citing Waste Mgmt.
of Carolinas, Inc., 315 S.E.2d at 377).
Additional Insured, Property Damage, and Occurrence
parties disagree whether Selective and Penn National owe a
duty to defend Weaver Cooke as an additional insured. Weaver
Cooke, Westfield, and Zurich contend that “Penn
National and Selective must provide a defense so long as it
might be possible for [p]laintiff in the Underlying Action to
establish property damage caused by conduct for which Weaver
Cooke is legally responsible.” (Weaver Cooke Mem. Supp.
Summ. J. (DE # 76) at 13; see also Westfield &
Zurich Mem. Supp. Summ. J. (DE # 71) at 3.) In response,
Selective contends “Weaver Cooke was sued by [New Bern]
for purely economic loss type damages[, ]” not property
damage. (Selective Resp. Opp'n (DE # 91) at 2; see
also Selective Resp. Opp'n (DE # 90) at 6; Selective
Mem. Supp. Summ. J. (DE # 80) at 5.) Similarly, Penn National
contends there is no basis for “[Weaver Cooke's]
contention that [ECM's] work was responsible for
‘property damage' as defined within the applicable
Penn National policy[, ]” resulting from its work on
brick veneer installation. (Penn National Resp. Opp'n (DE
# 84) at 10; see also Penn National Resp. Opp'n
(DE # 88) at 5.)
Section I of Penn National's and Selective's
policies-coverage provided for bodily injury and property
damage-Selective and Penn National both agree to “pay
those sums that the insured becomes legally obligated to pay
as damages because of ‘bodily injury' or
‘property damages' to which this insurance
applies.” (Selective Policy Excerpts (DE # 71-26) Ex.
23 at 10; Penn National Policy Excerpts (DE # 71-25) Ex. 22
at 13.) They also have a “duty to defend the insured
against any ‘suit' seeking those damages.”
(Selective Policy Excerpts (DE # 71-26) Ex. 23 at 10; Penn
National Policy Excerpts (DE # 71-25) Ex. 22 at 13.) Under
section IV-definitions-the policies identically define
property damage. Property damage is defined as:
a. Physical injury to tangible property, including all
resulting loss of use of that property. All such loss of use
shall be deemed to occur at the time of the physical injury
that caused it; or
b. Loss of use of tangible property that is not physically
injured. All such loss of use shall be deemed to occur at the
time of the ...